In this case, plaintiff and defendant were married for more than 19 years before filing for divorce. The parties reached a settlement agreement to all aspects of their divorce, apart from distributing plaintiff’s and defendant’s pension.
Defendant’s plan, unlike plaintiff’s plan, included a 3% cost-of-living adjustment, which meant that defendant’s monthly pension amount would gradually increase each year. Second, defendant’s plan permitted plaintiff as alternate payee to receive benefits before defendant retired. However, defendant could not receive pension benefits under plaintiff’s plan until she retired. Plaintiff is eligible to retire when she is 60 years old, and defendant is eligible to retire when he is 48 years old.
Pension Benefits are a Part of Marital Estate
Rights to vested pension benefits accrued by a party during the marriage are considered part of the marital estate subject to award upon divorce.
The two pension plans, which are both marital assets, should be applied evenly to the parties. The parties were each entitled to half of the pension funds. The trial court concluded that a 50/50 distribution method should be applied.
Pension Distribution Method
Defendant argued to apply a proposed offset method instead of the 50/50 distribution method. If defendant chose to retire in three years at age 48, it wouldn’t be equitable if he had to wait until plaintiff decided to retire in order to collect on her pension.
Defendant explained that rather than dividing both pensions in half and giving each party a right to 50% of the other party’s pension, applying an offset method, whereby plaintiff would keep her full pension and receive a smaller portion of defendant’s pension. The parties’ monthly pensions were similar in amounts, so he calculated a monthly base amount by combining both parties’ monthly pensions and dividing it by two. Because defendant’s monthly pension amount would be slightly higher, in order to ensure both parties received an equal monthly amount, plaintiff would receive an additional portion of defendant’s pension per month.
Defendant testified that the offset method would be the most equitable under the circumstances because plaintiff could keep her entire pension while still being able to receive a portion of defendant’s pension to ensure that the total value of the pensions was distributed evenly, and defendant could elect to retire early and receive a full monthly pension payment rather than receiving only half of his payment until plaintiff could retire 12 years later.
Court Declines Offset Method
The trial court declined to apply the proposed offset method and instead concluded that a 50/50 distribution method should be applied. The court explained that if plaintiff elected to receive her half of defendant’s pension before she retired, and if defendant retired before plaintiff, it may reduce defendant’s pension to the extent that he could not survive on his pension payment alone. However, the court also stated that there were circumstances in which the offset method would be inequitable to plaintiff, and noted that plaintiff’s right to her 50% of the pension plans need not be encumbered by the possibility of defendant’s anticipated retirement and unilateral decision not to seek further employment.
Most Equitable Method for Division
The court considered the value of both pensions, the contribution of the parties, as well as the fairness of distributing the property in a manner that would allow the parties equal access to their share of the property, irrespective of any indefinite future actions taken by the parties.
The trial court concluded that awarding 50% of each party’s pension was the most equitable method for division and entered a judgment of divorce providing that plaintiff would receive 50% of defendant’s pension, through an Eligible Domestic Relations Order (EDRO). The trial court also ordered that defendant receive 50% of plaintiff’s pension, through a Qualified Domestic Relations Order (QDRO).
Experienced Guidance with Property Division During Divorce
Are you facing a divorce in Michigan? Do you have questions about how your assets and your debts will be divided with your soon-to-be ex-spouse?
Financial issues are often the biggest concern for individuals and families who are facing divorce.
At the Plymouth and Ann Arbor law firm of Aldrich Legal Services, our attorneys understand the struggles you may face. We will work hard to help you obtain all to which you are entitled during your divorce.